April 25, 2016

ILS growth underlines Bermuda’s role as the World’s Risk Capital

Greg Wojciechowski, chief executive officer of the Bermuda Stock Exchange, examines the growing acceptance of ILS by the capital markets and the role that exchanges can play in the future.

The insurance-linked securities (ILS) market sits at an interesting point in its existence and now has the opportunity to encourage greater capital market participation by providing sorely needed resources to close the extensive exposure gap that exists in insurance markets globally.

In respect of ILS or alternative risk transfer, we are speaking about the convergence of two industries – the re/insurance sector with the capital markets.

Since the Bermuda Stock Exchange (BSX) entered this segment of the market eight years ago, we have sensed the global capital markets becoming more comfortable with ILS as an asset class and as a key part of their investment portfolio.

The growing acceptance of ILS by the capital markets has evolved this market segment to a pivotal point in its history, by allowing ILS vehicles to become a component in bringing much needed insurance coverage to parts of the world that are developing, under-insured or particularly prone to natural disasters.

Capital market participation can be a source of funding to help narrow the exposure gap that exists in parts of the developing world or for populations that are vulnerable.

Regulated exchange platforms, like the BSX, can play a role in creating the bridge to support capital flow to where it is needed most.

 “IT IS AN IDEAL TIME FOR EXCHANGE INVOLVEMENT – BERMUDA HAS WORKED HARD TO DEVELOP A WORLD CLASS REGULATORY ENVIRONMENT WITHOUT JEOPARDISING ITS REPUTATION FOR INNOVATION AND BRINGING PRODUCTS QUICKLY TO MARKET THAT MEET AND EXCEED THE NEEDS OF GLOBAL CLIENTELE.”

Exchange involvement

It is an ideal time for exchange involvement – Bermuda has worked hard to develop a world class regulatory environment without jeopardising its reputation for innovation and bringing products quickly to market that meet and exceed the needs of global clientele. For example, the island has become Solvency II equivalent, which allows Bermuda commercial reinsurers and insurers to be able to compete on an equal footing in Europe in writing business.

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Source: Intelligent Insurer

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